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Chapter 2: 43PS (page 115)

Journalizing transactions, posting to T-accounts, and preparing a trial balance

Consider the following transactional data for the first month of operations for Crystal Clear Cleaning.

Nov. 1 Stockholders contributed \(15,000 and a truck, with a market value of \)3,000, to the business in exchange for common stock.

2 The business paid \(4,000 to Pleasant Properties for November through February rent. (Debit Prepaid Rent)

3 Paid \)4,800 for a business insurance policy for the term November 1, 2018 through October 31, 2019. (Debit Prepaid Insurance)

4 Purchased cleaning supplies on account, \(320.

5 Purchased on account an industrial vacuum cleaner costing \)1,500. The invoice is payable November 25.

7 Paid \(3,900 for a computer and printer.

9 Performed cleaning services on account in the amount of \)4,700.

10 Received \(200 for services rendered on November 9. 15 Paid employees, \)400.

16 Received \(15,000 for a 1-year contract beginning November

16 for cleaning services to be provided. Contract begins November 16, 2018, and ends November 15, 2019. (Credit Unearned Revenue)

17 Provided cleaning services and received \)400 cash.

18 Received a utility bill for \(175 with a due date of December 4, 2018. (Use Accounts Payable)

20 Borrowed \)36,000 from bank with interest rate of 6% per year.

21 Received \(500 on account for services performed on November 9.

25 Paid \)750 on account for vacuum cleaner purchased on November 5.

29 Paid \(200 for advertising.

30 Cash dividends of \)1,400 were paid to stockholders

3. Post the journal entries to the T-accounts, and calculate account balances

Short Answer

Expert verified

Advertising expenses are the cost of advertising and required t-accounts are prepared in step 2.

Step by step solution

01

Definition of Advertising Expense

The advertising expense is defined as the cost incurred by the business for promoting and advertising goods or services.

02

Preparing the t-accounts

Cash

Nov 1 $15,000

$4,000 Nov 2

Nov 10 $200

$4,800 Nov 3

Nov 16 $15,000

$3,900 Nov 7

Nov 17 $400

$400 Nov 15

Nov 20 $36,000

$750 Nov 25

Nov 21 $500

$200 Nov 29

$1,400 Nov 30

Bal. $51,650

Accounts Receivables

Nov 9 $4,700

$200 Nov 10

$500 Nov 21

Bal. $4,000

Cleaning Supplies

Nov 4 $320

Bal. $320

Prepaid Rent

Nov 2 $4,000

Bal. $4,000

Prepaid Insurance

Nov 3 $4,800

Bal. $4,800

Equipment

Nov 5 $1,500

Nov 7 $3,900

Bal. $5,400

Truck

Nov 1 $3,000

Bal. $3,000

Accounts Payable

Nov 25 $750

$320 Nov 4

$1,500 Nov 5

$175 Nov 18

$1,245 Bal.

Unearned Revenue

$15,000 Nov 16

$15,000 Bal.

Notes Payable

$36,000 Nov 20

$36,000 Bal.

Common Stock

$18,000 Nov 1

$18,000 Bal.

Dividends

Nov 30 $1,400

Bal. $1,400

Service Revenue

$4,700 Nov 9

$400 Nov 17

$5,100 Bal.

Salaries Expense

Nov 15 $400

Bal. $400

Advertising Expense

Nov 29 $200

Bal. $200

Utilities Expense

Nov 18 $175

Bal $175

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Most popular questions from this chapter

What is involved in the posting process?

Question:The following transactions occurred for Lawrence Engineering:

Jul. 2 Received \(14,000 contribution from Brett Lawrence in exchange for common stock.

4 Paid utilities expense of \)370.

5 Purchased equipment on account, \(1,600.

10 Performed services for a client on account, \)2,900.

12 Borrowed \(7,100 cash, signing a notes payable.

19 Cash dividends of \)200 were paid to stockholders.

21 Purchased office supplies for $840 and paid cash.

27 Paid the liability from July 5.

Requirements 1. Open the following T-accounts for Lawrence Engineering: Cash; Accounts Receivable; Office Supplies; Equipment; Accounts Payable; Notes Payable; Common Stock; Dividends; Service Revenue; and Utilities Expense.

Before you begin this assignment, review the Tying It All Together feature in the chapter. Part of the Fry’s Electronics, Inc.’s experience involves providing technical support to its customers. This includes in-home installations of electronics and also computer support at their retail store locations.

Requirements

  1. Suppose Fry’s Electronics, Inc. provides $10,500 of computer support at the Dallas-Fort Worth store during the month of November. How would Fry’s Electronics record this transaction? Assume all customers paid in cash. What financial statement(s) would this transaction affect?

Question:Preparing financial statements from the trial balance and calculating the debt ratio

The trial balance as of July 31, 2018, for Sara Simon, Registered Dietician, is presented below:

Account Title Debit Credit

Office Supplies 2,300

Cash 38,000

Accounts Receivable 9,000

Prepaid Insurance 2,400

Equipment 16,000

Accounts Payable 3,000

Unearned Revenue 3,912

Notes Payable 31,000

Common Stock 18,000

Dividends 2,800

Salaries Expense 1,700

Rent Expense 1,100

Utilities Expense 500

Service Revenue 17,888

Total Balance \( 73,800 \) 73,800

Requirements 1. Prepare the income statement for the month ended July 31, 2018.

Question:Courtney Meehan has trouble keeping her debits and credits equal. During a recent month, Courtney made the following accounting errors:

a. In preparing the trial balance, Courtney omitted a \(5,000 Notes Payable. The debit to Cash was correct.

b. Courtney posted a \)1,000 Utilities Expense as \(100. The credit to Cash was correct.

c. In recording a \)600 payment on account, Courtney debited Furniture instead of Accounts Payable.

d. In journalizing a receipt of cash for service revenue, Courtney debited Cash for \(50 instead of the correct amount of \)500. The credit was correct.

e. Courtney recorded a \(210 purchase of office supplies on account by debiting Office Supplies for \)120 and crediting Accounts Payable for $120.

Requirements 1. For each of these errors, state whether total debits equal total credits on the trial balance.

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